Nordic Credit Rating has affirmed its 'A-' long-term issuer rating on Norway-based Skue Sparebank. The outlook is stable. The 'N2' short-term rating, 'A-' senior unsecured issue rating, 'BBB+' Tier 2 issue rating, and 'BBB-' Tier 1 issue rating have also been affirmed, in accordance with NCR's revised financial institutions rating methodology. The ratings are no longer under criteria review.
Rating rationale
Our 'A-' long-term issuer rating on Norway-based Skue Sparebank reflects the bank's solid capital position, low risk appetite and strong profitability. The bank's cooperation agreement with the Eika alliance is viewed positively, as it provides product diversity, shared development costs, and access to residential retail mortgage financing through Eika Boligkreditt. We have revised our view of the bank's earnings and expect pre-provision earnings to remain above 3% of risk exposure amount through 2027, supporting its capacity to absorb higher loan losses amid a slow economy. Our base case assumes that lower interest rates and a larger share of residential lending will help to reduce loan losses and non-performing loans over the next three years, improving our view of the bank's loss performance relative to domestic peers.
We anticipate that the merger with Tinn Sparebank in the fourth quarter of 2025 will expand the bank's geographical footprint but will not materially affect its earnings metrics or credit risk. However, we also expect the positive impact of the merger and the implementation of the EU’s Capital Requirements Regulation III (CRR III) on capital ratios to diminish over time, due to loan growth and higher dividends.
The rating is constrained by strong competition and the bank's low market share in the more populous areas of Buskerud County in eastern Norway. The rating is also limited by the bank's concentrated exposure to commercial real estate and retail mortgages in its operating region.
Stable outlook
The stable outlook reflects our expectation that Skue Sparebank will report improved earnings as merger-related expenses decline, with cost synergies and higher fee income offsetting moderate margin pressure. We also expect the bank’s credit metrics to improve over the next 12 months, partly due to lower interest costs. However, we anticipate that CRR III on capital ratios will diminish over time.
We could raise the rating if the bank demonstrates a sustained commitment to maintaining material regulatory capital buffers and a Tier 1 ratio consistently above 22%.
We could lower the rating if there is a deterioration in the local operating environment that impairs the bank's asset quality, a sustained decrease in the Tier 1 capital ratio to below 18%, or risk-adjusted earnings metrics remain consistently below 2.0% of the risk exposure amount.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | A- | A- |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N2 | N2 |
| Senior unsecured issue rating: | A- | A- |
| Tier 2 issue rating: | BBB+ | BBB+ |
| Additional Tier 1 issue rating: | BBB- | BBB- |
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Anine Gulbrandsen, analyst, +4797501657, anine.gulbrandsen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
The methodology documents used for this rating are NCR's Financial Institutions Rating Methodology published on 12 May 2025, NCR's Rating Principles published on 14 Feb. 2024 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.